What ideas is Europe mulling to solve its debt
BRUSSELS (Reuters) Europe is working to ramp up the fire Canada Goose Parka power Canada Goose Outlet of its bailout fund amid growing alarm over its slow handling of a debt crisis that threatens to derail a global economic https://www.canadagooseoutletmall.com recovery, but European policymakers disagree over canada goose factory sale the best course of action.
Many of the options to bolster the 440 billion euro European Financial Stability Facility (EFSF) have catches, including opposition from countries canada goose store like Germany, which fears a replay of its disastrous economic uk canada goose outlet policies of the 1920s.
Meanwhile, euro zone officials played down reports on Monday of emerging plans to halve Greece debts and recapitalize European banks to cope with the fallout, stressing that no such scheme is canada goose uk black friday on the table yet.
HOW buy canada goose jacket cheap BIG MUST THE EURO ZONE FUND cheap canada goose uk BE TO STOP THE CRISIS? Rough calculations suggest the EFSF, which borrows its funds from the markets backed by guarantees from euro zone states, might cope with a bailout of Spain but that it would not have enough ammunition if Italy needed help.
buy canada goose jacket cheap The EFSF is already committed to providing 17.7 billion euros in emergency loans to Ireland and 26 billion to Portugal.
canada goose deals In addition, it takes over cheap Canada Goose the remainder of Europe contribution to an initial bailout of Greece, which is likely to require around 25 billion euros, and is expected to provide two thirds of buy canada goose jacket a 109 billion euro second bailout canada goose black friday sale of Greece.
canada goose Taken together, the EFSF current commitments total at least 142 billion euros, leaving it 298 billion Canada Goose Jackets euros.
canada goose clearance A package for Spain might top 290 billion euros, according to some estimates, while a rescue bill for Italy could total almost 490 billion euros.
Canada Goose online Some experts suggest doubling the EFSF. Others talk of boosting it to trillion. But the way to restore confidence, which will be determined by the reaction of canada goose uk shop stressed markets, goes beyond simple mathematics.
Canada Goose sale COULD TURNING THE EFSF INTO A BANK HELP? One way of bolstering the EFSF size, being proposed by the Center for European Policy Studies, a think tank in Brussels, is to turn it into a bank.
Canada Goose Parka This means the Luxembourg based vehicle could lend money to countries in difficulty and turn to the European Central Bank to refinance such loans rather than having to rely solely on its limited capital base.
canadian goose jacket Banks Canada Goose Coats On Sale typically lend roughly 10 times their capital, and experts who have drawn up this model believe the EFSF could do the same.
canada goose clearance sale That would mean the 440 billion euros of capital in the facility could canada goose coats in theory canada goose clearance sale be transformed into canada goose coats on sale more than 4 trillion euros of fire power.
canada goose coats on sale But the reality is not that simple. The EFSF would only qualify to receive credit from the ECB that was as good as the collateral, for example Spanish government bonds, that it has to offer.
If the EFSF buys these from the Spanish government directly, then a market discount to reflect the risk of default has to be applied, in addition to the standard haircuts the ECB charges for collateral. This reduces the amount of credit the EFSF could get from the ECB.
canada goose black friday sale But it is political opposition rather than technical hitches that pose the biggest and perhaps insurmountable hurdle.
cheap Canada Goose At the core of these are concerns recently aired by German Bundesbank chief Jens Weidmann that the ECB may canada goose already be overextending canada goose outlet store itself.
The euro zone central banks and the ECB have a combined capital base of 82 billion euros. It has Canada Goose Online already lent 535 billion euros to banks and bought a further 150 billion euros of government bonds to prop up the market.
So far, Germany, the euro zone chief paymaster, and the ECB are opposed to the idea, suggesting it has little chance of making it beyond the uk canada goose drawing board.
canada goose store Last weekend, German finance minister Wolfgang Schaeuble said he was looking into alternatives.
WHAT OTHER SCHEMES COULD BOLSTER THE EFSF FIRE POWER?
One such alternative would be to canadian goose jacket use the EFSF to insure investors against future losses when they buy Italian or Spanish bonds.
Canada Goose Jackets The EFSF would issue enhancements for new bonds that could cover potential losses, cutting the canada goose clearance risk for investors and making it easier for countries like Italy to tap markets.
buy canada goose jacket Such a scheme would not help Greece, said Sony Kapoor, a financial expert who has advocated the model, but would set up a for Italy and Spain that would allow them tap money markets even if Greece were to default.
could take the form of the EFSF offering insurance against, say, the first 20 percent of any losses on these. and would enable the EFSF to bring down the borrowing costs for Italy and Spain for the next 3 years or more, Canada Goose sale said Kapoor, the managing director of think tank Re Define.
the borrowing costs for Italy and Spain is a necessary step before any restructuring of Greek debt can be seriously contemplated.
options being discussed are primarily about policymakers, who believe that Italy and canada goose uk outlet Spain are fundamentally solvent, calling the markets bluff that they are not.
MECHANISM ACHIEVE? Unlike the current EFSF, the European Stability Mechanism (ESM) is permanent and has a pool of capital of 80 billion euros, paid in by countries in the same way as they do with the
Canada Goose Outlet ECB. Starting the ESM in July next year, rather than July 2013 as planned, could reassure Canada Goose online investors because it provides a second lever to support markets alongside the ECB.